Malta’s FATF grey list after-taste, six months on

It has been six months since Malta was removed from the Financial Action Task Force (FATF) list of countries under increased monitoring (i.e., the grey list), which allowed both operators and regulators in the field of financial services to breathe a sigh of relief. However, it is yet unclear to what extent matters have improved since Malta was de-listed.

The greylisting had forced the Government to double down on implementing stringent rules on anti-money laundering and combating the financing of terrorism (AML/CFT), to mitigate the listing’s worst effects, by keeping it as brief as possible. This has however required businesses to adapt to these new rules at record speed.

According to the President of the Institute for Financial Services Practitioners (IFSP), Malta’s financial services industry is suffering from fatigue. During FinanceMalta’s 15th Annual Conference held on 1st December this year, Mr Zarb took the opportunity to highlight that the “cost of doing business has increased tremendously”, making the country, and the sector, “less competitive.”

Mr Zarb emphasised that the issue was not the amount of regulation, but how it has been undertaken, adding that it ought to be done more efficiently. With all the tribulations that have affected Malta’s financial sector in recent years, the industry is fighting to prove its credentials and bolster its reputation.

One of the main concerns was that a prolonged FATF greylisting would trigger an exodus of iGaming companies, however, this was prevented.

Despite being removed from the FATF greylist, Malta’s reputation has not yet been restored. Lasse Rantala, Chief Executive Officer of Rootz Ltd, a local iGaming company, confirmed that country’s reputation is still impacted due to having been on the grey list in the first place, with ease of doing business with both local and international partners no different to when the country was still listed.

Mr Lasse remarked that “banking in Malta” continues to be one of the biggest challenges which arose during the FATF greylisting that persist to this day. Indeed, the banking sector has not gone unscathed in recent years, with difficulties arising even before the greylisting.

Prior to the FATF saga, one of the main challenges for local banks was maintaining correspondence banking relationships, due to banks globally undergoing a de-risking exercise. This led to the Bank of Valletta losing all of its US dollar correspondent banks before the country was even greylisted.

When Malta was put on the FATF greylist, this further strained Malta’s banking sector’s capability to maintain correspondent banking relations. So, it’s no surprise when, according to a BOV spokesperson, that, “correspondent banks reacted positively to Malta’s removal from the FATF grey list,” adding that it is not the only factor correspondent banks consider in their relationship with BOV.

However, it does not seem as though the banking sector is done adapting to the present regulatory environment, with BOV having just recently tripled its administrative fees for its business banking clients, due to added costs related to regulatory checks and balances.

It’s difficult to predict how soon Malta’s financial services sector will have fully recovered, however, there are early signs. Malta was positioned in 67th place out of 119 financial sectors according to the Global Financial Index, an improvement of 27 places since Malta was removed from the FATF greylist.